At the same time, the number of users in the r/wallstreetbets section of Reddit, an online community platform in the United States, rose rapidly from 1.5 million to 7.6 million during the retail war.
All these make the role of social media in this historic moment of Wall Street controversial, and also raise new questions for the supervision of social media.
"(These events prove that) those assets can expand not because they have any value or intrinsic value, but to a greater extent because the network effect of social media can achieve their value, no matter what the value is." Stephen Davies, a digital technology analyst in London, said, "The members of Wallstreetbets are made up of a generation who grew up watching movies like The Wolf of Wall Street and The Big Short. This community is now a toy for big boys who have access to the financial market, and they can play their high-risk/high-return trading strategies on their mobile phones. "
Lawyer Jangdo, director of Beijing Hua Xun Law Firm, said in an interview with China Business News that specifically, whether the behavior of retail investors is illegal depends on whether it belongs to the "manipulation" behavior of the US securities law. According to the securities law of the United States, it is difficult to identify the behavior of American retail investors as manipulation. Generally speaking, the act of colluding with others, publishing false information, creating false prosperity and inducing others to buy through major omissions is to manipulate the securities market. The United States strictly prohibits the dissemination of false or misleading information to manipulate investors to buy and sell securities. However, in this incident, Reddit users used social media to gather and recommend stocks. At present, there is no evidence to prove that they are "spreading false or misleading information". On the premise that there is no evidence to prove that the relevant users publish false information, it will be difficult to identify it as illegal; And judging from the news released by the current US official, it is still controversial which side manipulates the market, which needs to be further determined by relevant institutions.
Is it related to the epidemic again?
Another observer said that the incident happened at the stage when various sports and online sports betting businesses were temporarily shut down due to the COVID-19 epidemic. Forums like WallStreetBets can provide young, lonely and financially insecure individuals with a much-needed sense of community during the long-term home blockade. "People are looking for social connections and being part of something." Dan Egan, general manager of behavioral finance and investment at robot consultancy Betterment, said, "This is a very interesting multiplayer sport. You can cause price changes and help your team win. This ability is very attractive. "
"These Reddit traders are not professional investors, but there is quite a deep analysis in this forum." James Kardatzke, co-founder of Quiver Quantitative, a data platform, said, "People there know very well what market mechanism can lead to soaring prices."
In the Wallstreetbets section, the most popular post on February 1st was "Did I make myself clear? We don’t want to reduce our holdings. It won 34,000 praises in just 3 hours. A user named AntiLibbie replied with praise: "No matter what happens, remember that we made a billionaire cry on national TV."
"This ‘ We confront the world ’ The information is really powerful. " "This shows the cultural gap between Wall Street and ordinary people," said Clay Shirky, a professor at new york University.
Flaury, a 25-year-old engineer from Ohio, was one of thousands of people who initially participated in the organization of holding a group to force the air in Wallstreetbets. The amount in his account has risen from $4,000 to $124,000. After withdrawing $20,000, he said that he didn’t mind losing the remaining profits.
"On wallstreetbets, losing money is a ritual. Therefore, the community often faces criticism for encouraging less cautious investment methods, but its millions of members will have a significant impact on the stocks mentioned there. " Davis said.
If the stock market has become a participatory game, applications such as online trading platform Robinhood are the arena free of tickets. During the epidemic, the number of users of the platform increased sharply, with an average of 500,000 new users per month. In fact, not only the United States, but also Britain has Trading 212, Australia has Stake, and India has INDmoney.
"The proliferation of these applications is risky. The story of an amateur trader who lost his life savings reported in the media from time to time illustrates this point." Davis said, "What does it mean when anyone anywhere can trade and invest in the same financial products as professionals on Wall Street and the City of London? Unless the government introduces a regulatory policy, there is no turning back. The technical infrastructure has been put in place and the amateur investor community is growing rapidly. This is not only temporary, but something more fundamental and longer-term is happening. "
As early as before the epidemic, more and more investors relied on digital platforms to study transactions or make investment decisions. According to a survey conducted by consulting firm Brunswick in 2019, 98% of investors indicated that they used online resources for investigation and research. In addition, most investors (88%) make decisions based on the information they have learned online. This is a sharp increase from 70% in 2018, and it has changed greatly since 2015, when only 41% people made investment decisions based on online information. Social media platform has become an important tool for investors, and LinkedIn is still the most important. 63% investors use LinkedIn for research, 55% respondents use Twitter for research, 56% investors choose Wikipedia, and 48% investors use financial podcasts as information sources.
Young investors and analysts not only use social media for research, but also use social media for investment decisions. Among the people aged 20-29, 44% invested according to the information obtained on Twitter, 29% used WhatsApp for this purpose, and 20% acted according to the information obtained on Reddit.
The survey also found that investors believe what they find online. Their trust in Twitter, YouTube, Reddit and WhatsaApp can be comparable to that of American short news media platform Axios, Huffington Post and new media group Vox.
Where is the boundary of supervision?
"As long as there is a market, people will hand in rumors and news in always online. In the 1990s, they used AOL, Yahoo and chat rooms. " Steve Sosnick, chief investment strategist of Interactive Brokers, an American brokerage, said, "Social media is much more efficient today. It is more common, but the reason is the same."
Of course, in response to the incident of American retail investors forcing empty institutions, some critics say that this is the illegal manipulation of the market by social media users, which has also triggered discussions on social media supervision.
Cassandra Cummings, a former financial adviser of Bank of America Merrill Lynch, now manages The Stocks and Stilettos Society, a Facebook trading group of 80,000 people. She said that in 2020, she repeatedly refused to ask her group to take collective action around a stock. "They know that I have the right to promote the company’s share price through my group." She said.
Stavros Gadinis, a law professor at the University of California, Berkeley, said that it is difficult but possible to sue users who cheat investors. Social media companies should have the same ability as stock market operators and can intervene to prevent suspected manipulation.
However, some legal experts pointed out that the threshold for social media platforms to supervise users’ comments on transactions is very high. Kosev, a scholar of cyber security law, said that the speech itself needs to be a criminal act against the law, and there needs to be a clear stipulation that it is illegal to spread the speech. In addition, the precedent of the First Amendment generally holds that a company must be aware of the criminal statements posted on its platform before it can be responsible for them.
Jangdo told China Business News: "This involves the boundary and tolerance, the principles of openness and fairness in financial and securities market transactions, and the obligations and responsibilities of online platforms such as social media. The network is not illegal. If the behavior of relevant users in the GameStop incident is determined to be illegal, or relevant social media bears corresponding responsibilities, social media and other online platforms will process relevant information and other content in the future. "
Jesse Fried, a professor at Harvard Law School, said that the stock exchange forum seems to be "purely legal behavior, that is, irrational and excited buying by amateur investors".
Sinan Aral, director of the Digital Economy Initiative at the Massachusetts Institute of Technology, also believes that it is difficult to identify bad actors from these excited investors.